tv Bloomberg Daybreak Europe Bloomberg June 30, 2017 1:00am-2:31am EDT
♪ manus: volatility returns. europe is in the red after u.s. and asian equities slide. the s&p 500 fell the most in six weeks with tech stocks leading the way low. global bonds of drop. a deluge of asian data. japan's core consumer prices creep higher for the fifth month. half an hour before the u.s. travel ban took effect, the continued astration court challenge. a why he is taking issue with how the government implement the
new rules. -- hawaii is taking issue with how the government implement the new rules. ♪\ you are welcome to "bloomberg daybreak: europe." i am manus cranny. what a day it has been in terms of data from japan inching higher in terms of inflation, what is happening with the pick japan's target, what could change. matsui joins us later on. let me bring you to the concept that is becoming very real. volatility is going to take along at the bottom of your screen. along at the bottom of your screen. we closed at 40% on the day.
volatility is pounding along on the asian session. you see asian topics volatility rising as well. of technologyh flu, or is it the great rotation? months to theix day since donald trump has inaugurated. what is it achieved apart from a great dissipation in terms of some of the biggest blockbuster trades? blue line, bottom of the screen, bloomberg dollar index down 6.7% so far this year. this time last year, we were down 3.8%. the phoenix offense. -- ascends. i am talking about not just the euro but the mexican peso. undoubtedly, the mexican peso was the return of a carry trade in splendid formation, up 19%. the question for equity markets,
fx markets, and bond markets, what happens with the central bank reset, and can donald trump deliver on the fiscal side of the equation that he promised? in equities, you were on the wrong side of this trait. msci country world index is back. -- comes back. it has been the best start of the year in 19 years. the mliv blog has some wonderful lines. literallys were quite puking up when it came to when it came to technology. nintendo, softbank, sony, all on the downside. .9%.ollar down this is the bloomberg dollar index. it falls again.
1.5% in june. four months of losses. oil has a little bit of a reprieve. it is the longest winning streak in two months. the market didn't needed. opec says they have no plans to discuss further and deeper cuts. that is a little bit of a reprieve in the imx trait. if you were in one of those equity markets, you were wrong. what do you do? whatis what did -- that is we debate. let's get to juliette saly with your bloomberg first word news. juliette: donald trump and vladimir putin will meet for the first time as heads of state. the meeting during the g-20 summit in hamburg next week will come as relations between the two countries are at the lowest in decades.
in the u.s., the trump administration's revised taliban -- travel ban has a new court challenge. it began at 8:00 p.m. eastern time, but have an hour before the band started, hawaii asked the judge whether to clarify whether the government violated u.s. supreme court instruction in defining who is covered by the then. the justice department declined to comment. korea's new president has met with president trump at the white house. it comes amid differences between the two leaders over how to deal with north korea and imbalances in steel trade. after the meeting, trump tweeted. u.k.'s per minister has won parliamentary approval for latest program after being forced into a confession on abortion rights.
theresa may's brexit dominated agenda for the next two years passed by 323 votes. earlier, the government defeated to opposition amendments. -- two opposition amendments. sentiment among u.k. households has fallen to its lowest level since the brexit referendum. the consumer index dropped. that is because of the rising cost of living and the election. there is evidence the world seconds largest economy making its momentum in the second quarter. none manufacturing pmi gained. it gives policymakers room to onus on the policy sector --
the policy sector. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . had from wall we street, not a great session to round out the month and a quarter for asian equities. june has been a great month for asian equities. the index up 1.4%, the six month again. -- the sixth monthly gain. having a look at some of the stocks in detail, nintendo shows you the picture of what we have been seeing in asia, down by 3.3%. tencent also weaker. morgan stanley said it's recent rally can continue. this stock has risen 154% so far this year.
bt investment in sydney, one of the first -- worst performers in the region. have a look at this chart. tomorrow, the 20 year handover anniversary of the handover from -- of hong kong from china to britain. --s is the china have to china-hong kong uncertainty index. heading into the handover, uncertainty was less than what it is now in the last couple years. interesting reading. the green line is the average reading from 1995 until today. it is showing there is a little bit of skepticism as we had the 20 year anniversary of the handover. manus: thank you very much. hawkish terms of plenty coming from central bankers around the world.
it has been a period embodied by the rise and fall of deflation trade. no end in sight for three decades, bond bull market. production jim used to put pressure on the price, causing opec to extend its cutting arrangement. let's bring in one gentleman to make sense of it all. paul donovan. thank you so much for coming in. wrong, or get it so did we. are, six months in, dollar on its knee, mexican peso barnstorming us. it is not theg euro that is strong, just the currency is strong. talk to me through where we got this wrong. paul: what we had at the start of the year was optimism about donald trump and what he was
going to do. it has been difficult distinguishing between what the u.s. president is saying, what he is able to do, and whether or not he is going to change his mind on some things. with mexico, he was elected, there with the immediate panic, and then it becomes fairly apparent that what he says and what he is intending to do are not the same thing necessarily, and congress is not want to fund the big wall anytime soon. then, we get that shift coming back. what we have got in the united states is a situation where the economic momentum left over from the tail end of president obama has carried on in the first half of this year. the labor market is still fine. that is a normal economic story. what it is not is a 4% growth. i don't think anybody really believe 4% growth. manus: the imf don't believe 4% growth. it brings me to the bond market. what is genetically changed --
dramatically changed? we have seen this inflection. slightly more aggressive rising in the yield curve. what changed to move this? startednd traders listening to economists. manus: you are quite happy about that. paul: i am. what we have had is an issue where the financial markets tend to obsess over it, a data point. what they forget is the central bankers do not. they are economists. a take the long-term view, looking at the trend, and the trend in inflation is normal. aroundnd in growth is its some average. the trend in employment is a full employment. manus: we are getting too caught up in the minutia? paul: not only that, but we see the market reacts.
it ignores the fact it is not .7%. and it will revise higher. as a market up reacting to the initial data, which is not accurate. economists do not sit there and say, it is 1.4, so we better plug that into our mobile's. set --the consumer was the consumer side was strong as low. paul: absolutely. manus: you say the better it is for the world. asset classes are beginning to reprice. the dollar is repricing. this is treasury paper, where we got estimates at the end of the second quarter would be. is down, i take. we are on our way. how much of an issue is that in terms of growth? what is that do for the federal reserve?
are they on track for what they have told us? paul: remember the bond market is rigged. you have regulation forcing certain investors to hold bonds. you have the fed itself holding bonds. captive will of investors. -- pool of investors. nonetheless, there is upward pressure. is that going to derail the economy? no. derailede going to be by a .4 percent, .5% in the interest rate, you should not be running a company. this is not a cataclysmic issue. over the last two years, the real interest rates in terms of fed funds have not gone up. the fed has been matching the rise in inflation. this is hardly an aggressive situation. janet yellen is no paul volcker. we are not seeing a shock coming through and are medically
flipping, recognizing volatility is something that has not gone away forever. let's talk about some of the data. china's official factory gauge rose in june. activity is more robust than expected. to beijing.raight tom mcginley joins us. -- tom mackenzie joins us. tom: beating all estimates. it is the improved trade environment. if you peel back at number, then you get the new export numbers. they are the highest they have been in five years. there has been some upgrading of the industrial sector. that helped is all. the corporate in china are able to be off some of their deaths, profits are improving, they are hiring more. analysts say looking to the next two quarters, they expect a gradual slowdown at the worst.
we had the nonmanufacturing pmi numbers. they beat the main dampers. -- main numbers. i just opened one of the bloomberg first word. the firsts on for quarterly gain in nine years. it is substantial. when it comes to the issues for the pboc, it is about currency management, and it is about managing that deleveraging. where are we in the cycle of deleveraging? tom: absolutely. in terms of deleveraging, the pmi number makes -- gives more room to continue pushing up those rates to crack down on wealth management products, the insurance industry as well. thinksrg intelligence
the pboc might start to take its foot of the pedal a little bit in terms of the regime, the campaign they have been on. the party congress in china in october or november this year, to ensure there is financial and economic stability leading up to and during that important event. you have been talking about the reflation trade. chinaoducer prices in have started to come off a little bit, but that slide seems to have come to an end. that may be a positive to that reflation story. we will get more details on monday. mind the gap between the private and public data. tom mackenzie on the latest dataflow from china. let's stay in the region. we just had japanese core consumer prices. they creeped higher. it is a flow rise. is far fromlation
the bank of japan's target. with kathy matsui. thank you for joining us. good news on the core number. we should take heart with this, i presume. does it in -- does it embolden you in any way? i think it is pretty much in line with market expectations that inflation is gradually coming out of the woods. we are beginning to see a little bit more green shoots appearing on the income and wage front. the level of gains are still muted. directionally, this is what we had been anticipating. over the medium-term, it is a good sign for the market and economy. manus: you mentioned wages. this is the global phenomenon, isn't it? unemployment rates are at
reasonably low levels. weightlessalmost ess economyagel rising. i am talking about bank of england, the fed, along with the ecb. bank of japan still fully engaged to the end of the road da's term? koru kathy: i think so. place,mework they put in which is qualitative easing with the yield curve control, is probably going to remain as is for the foreseeable future. going back to what i said earlier, it is not as if wages are stagnant. you think about the fact that the offers to applicants ratio measures how tight the job market is.
98% of high school graduates can get a job here. we are beginning to see because of the absolute and acutely shortages that are burning in society, employers and companies are having to bite the bullet and beginning to wage -- raise wages. 11 -- littlettle bit of an outlier. it will be some time before we see a significant shift in that regime. manus: you and the team have released some -- take me through the biggest risk factor. there are a couple. i want to focus on the bank of japan speculatively -- precluded t2 by eps. -- proclivity to buy eps. paul: we are cautious in the near-term.
part of it is because we are concerned that the flow of funds landscape domestically is not as generous as it once used to be. you mentioned the bank of japan. they have a ¥6 trillion per and i'm purchase program, which has not been touched. as i wrote, the next move down the road is probably going to be a shrinkage of the program as opposed to what an expansion or augmentation. as opposed to an extension or augmentation. you are beginning to see some distorting effects of the presence of the bank of japan's withship in the market high market cap blue-chip stocks having anywhere from 70%, 80% ownership. that is something i think people
have to keep in the back of their minds that this is not a permanent presence or buyer in the market, but at some point that will be gradually withdrawn. something that is a bit like kids being addicted to candy. the bank of japan has been inside. when it comes to the leader of japan, shinzo abe is populated -- popularity is under pressure. what is the significance of that? is that a cautionary risk to us as we look at japan from a global investment perspective? headwindat is another that gives us pause for the near-term outlook in japan. out, the support .ate has fallen
if you look at the correlation long-term between the cabinet support rate and the nikkei 225 index, it is a reasonably tight correlation. , the level it is not is still high compared to cabinet support rates in the past. we are worried about the precipitous pace of that decline. what i wrote about is the concern i have that if the constitutional provision process -- revision process that he , unless he manages this carefully, there is a risk that the support rate declines further. this is not a huge concern, but it will be one factor that cap's the upside on the market in the near-term. manus: they do so much for joining us. kathy matsui, chief equity strategist in goldman sachs
there was a decent move yesterday. you can see on the gmm this rmb is bouncing back. it is one of the notable takeaways. in terms of markets, you're not seeing very much. a very small movement equities. -- a very small move on equities. you see a similar thing on other charts. the bund yields. you see this range we have been in. we have yet to break above .5, and yet this move feels big of the last -- over the last few days. forecastsee be year in
is for .6. that is the accurate forecasts. we could break above it. -- that is the aggregate forecast. we could break above it. this is the most fun chart i have seen a morning. this is the trump tweeted trade. trade.t it sounds frivolous, but i don't think it is. the market is continuing to price in the lower and lower probability of getting anything done on the hill. this is a distraction. this distracts anybody in washington from getting on. frivolous, but there is a reason behind it. you can see the reaction yesterday and the s&p futures. i think there is a reason for that, and i think it is simply that washington is going to have an inability to get beyond this in the short-term and get on with the weakness and getting things done on health care and moving on to tax or from. i think it is serious. manus: it is interesting when
you see the reactions. paul ryan not exactly in support of trump. electronicabout the copy or hard copy. this is the cover story. read, read, read. -- red, red, red. estimatee consensus for the year. lean towardse paring its asset purchases. is it really that dramatic a move? a couple of futures traders out there could be in a bind this morning. put this in perspective.
initial reassessment of risk, and we touched on it a little bit, these markets were right for a bit of correction anyway. paul: when you go out and speak to clients, everybody is expecting that the ecb is going to taper back its bond purchases next year. everyone has been looking for mario draghi to overcome and go through the rehabilitation program. what is it that him saying, i admit i am edited to easing, i am going to cutbacks, has left this reaction? perhaps come sooner than people were expecting, but most people in the markets have been looking for a september announcement to come. necessarilynk it is that surprising. i think markets woke up and thought, yields are rather low relative to where we should be,
and we have had the smarter to move. -- margaret move. ate move. it was carney, yelling, and mario draghi. when you get a coalescing of voices, i think that is what rumbles the markets. let's talk about the hard data. the inflation data for june is going to be close to watch. the ecb weighing how and when to execute. the consensus is a slowdown. 1.2% from 1.4%, and then a small pickup on the court. -- the core. this means me to the great debate. yellen and -- mario draghi would probably counter and so you have got to
look through. the five years are falling over. is that what you would say? paul: if you take a step back and look at the longer term, u.s. inflation in line with the 20 year average. , either sideation of its 14 year average. this is not a low-inflation environment. this is a normal inflation environment. , andwe are getting noise of course you are. it is local and technical factors. , what we sawoblems yesterday, spanish inflation is lower than expected, lower than the consensus. the german inflation is higher. we are storing to see the divergent story coming through. it is all down to the labor markets. the german labor market is strong.
off we go. the final story is about china. tom mackenzie talked us through the data. it bp estimates. that is good news for the markets. the services number also rose. activity this year is more robust and can be expected, giving room to focus on reining in the financial risks. that is the drumbeat the pboc has been giving us. i take it this is good news for the world that china has a nice mid-bandwidth level of support in terms of growth. paul: what we have is an opinion poll sentiment in china. this is not going to cause me to rush out and revise forecast about the global economy. sentiment to data is increasingly prone to global
reactions. nonetheless, china, this year, is going to grow at around 6.7%, because the president once that. -- wants that. this is just noise in the background. it is going to grow and there is no point discussing it. yuan: can we discussed the ? it has had its best quarter since -- in years. this continues? paul: yes. we are looking for the dollar to begin. it is not going to collapse. the problem for the u.s. is they
need to find $2.7 billion for the rest of the world every day and the rest of the world is less inclined to give them the money these days. that is probably politics and that central banker not intervening, that opec is not buying assets. there are a variety of factors here. in that situation, yes, the dollar sinking so much. the chinese are pegged to a basket of currencies. manus: let's talk about the u.k. and prime minister theresa may. she won parliamentary approval for her legislative program, which was won by being forced into a concession on abortion rights. the brexit debate dominated the agenda.
earlier, her government defeated two amendments from labor and -- from labour that thought to soften u.k.'s departure from the e.u. mark carney says the mpc may need to raise rates. more to itlittle bit than that. chief globalis the economist at ubs will management. -- ups wealth management. mark carney, quite aggressive. the second part of his sentence was, if i see wages, i might be moved. you were not going to see tremendous move. concur? tol: i think it is unlikely
see huge moves. the wage data we should be careful about. when you get into the detail of what is happening with wages, the weakness in wages is fairly narrowly focused. it is the financial sector. that is where you are seeing weakness. in that country at large, the financial sector is not that significant. you have a narrow decline in wages. other wages are holding. it is a somewhat mixed picture that comes through. manus: take a look at this. i quit is the title of this chart. sawcan see the run up we through the brexit debate. the lady is we have
leaving the bank of england. it could be setting up alarm bells. when you look at a chart like that and we just had the wages conversation, that worries me. one of the features we have seen since the referendum is certainly that people are not losing their jobs, but what we are seeing is that the jobs that have been created are perhaps more temporary in nature. they are more likely to be contract work and then full-time work. that has an impact on rates. the new jobs being created are temporary. if you have a full-time job, you are less likely to quit. there is the possibility to or not quitting because you have a pay raise. market mayt labor actually be paying up, what is happening -- which is what is happening in the states.
it is my the options available, but it is not an automatic alarm bell. i am not looking for aggressive wage growth in the u.k., because i do not think we will get the full-time employment growth. i would caution that we should not go overboard in saying this single indicator is going to start heralding a big decline in wages. manus: briefly, the market has moved to 60% probability of a rate hike before the year ends. pricing onorrect probably? paul: i think it is strong. i think the bank is likely to stay stable. the bias is toward a hike. paul donovan stays with the daybreak team. he is with ubs wealth management. later today, bloomberg speaks with eric garner. that is at 9:30 a.m. u.k. time.
china's that china's president -- stephen engle filed this report. we are here at a former british air base. addressedxi jinping thousands of mainland soldiers lined all the way up and down this airstrip, along with these armored personnel carriers. hundreds of them, including military aircraft as the president wrote in and in open topped vehicle, addressing the soldiers, saying, hello, comrades, good work. those are the two lines he said repeatedly as he drove down the tarmac. force andhow of
surreal for a reporter like me. never have i seen such a display from the people's liberation army and for most accounts, coming from china, likely we will see in hong kong more of a show of force or a display of the military from china in hong kong going forward. it has been quite behind closed doors up until now. the message to those pro-democracy activists in hong , hong kong, you are in my heart, but on the other hand, i can be boston. stephen engle, bloomberg news, hong kong. there is only one boss on this show and she has been off all week. anna, we look forward to seeing you. the charts for you
they announced new plans to forge a closer relationship with shoppers. they expect sales to increase this year, exporting currency effects. plansbuilt -- there are to offer goods directly by amazon. equityead of acquisitions for asia-pacific is one of many hired in recent months. the move is part of a broader push by a german bank to see client assets rebound. that is your bloomberg business flash. the trump administration, ae revised travel ban faced new court challenge even before it took effect overnight.
hawaii has asked a judge to clarify whether the government violated the supreme court's instructions in defining who is covered by the ban and who is excluded. the justice department declined to comment. jody joins us now from hong kong. took effect last night. were there any left minute attempts to halt it? like it is taking effect, despite the challenge. the challenge deals with the issue on how they will determine who can, and who is exempt. that is the issue here. it is going to have to be determined at airports as well, whether you have a bona fide exception or not. manus: there are some questions,
what this could lead to in terms of confusion. parameters level of in terms of who can come in. for example, mother-in-law versus grandmother. there is a strong distinction. words are the real confusion. jodi: yes. really the whole issue of whether you have a bona fide relationship. that would mean a family relationship. one would presume a spouse or parent would be the relationship, but what about and send uncles, grandparents? what kind of letter of employment do you need to satisfy the requirement of it being a bona fide work relationship? that is going to play out over the next few days. some is expected to be confusion. experts have said they expect
confusion. jodi schneider, thank you very much. donovan is a chief economist at ubs wealth management. played for me what this latest -- encapsulate for me what this latest in the trump saga says to you. the twists and turns are largely irrelevant. from an economist point of you, what we have are what we call a signaling effect. the u.s. administration with the first ban has signaled hostility to certain groups, a situation where some would argue that this is prejudice, discrimination. in that environment, you create a signal of a less welcoming
place to visit, to invest. beyond those countries which are affected. this is a more general, do i want to visit a country that has this policy? i want to invest in a country that has this policy? the signal is the issue. the noise we are getting matters a lot to the individuals concerned, but economically, that is not the issue. manus: let's talk about europe. the government is considering a $34 billion investment in infrastructure growth. meanwhile, you have billionaire entrepreneur telling bloomberg what he thought macron was a positive force. him, --
manus: paul donovan is a stay with us. -- is still with us. give macron tou achieve? paul: i think he generally should be considered a positive economic force overtime. i think there are two things to consider. first, structural reform does not happen overnight. this is something where the benefits will take a considerable public time. -- period of time.
remember ishing to that his mandate was not overwhelming. we saw with the national assembly elections as well were there was a low turnout. politics is the unions, the civil service. -- the-- must meant establishment is also something to consider. manus: paul, thank you so much. it is just over an hour into the markets open. -- until the markets open. we are going to keep an eye on some of the tech stocks. what is going to happen?
manus: volatility returns. europe in the red after asian equities slide. the s&p 500 falls the most in six weeks, tech stocks lead the highway to the low lands. bonds drop. a deluge of asia data shows expansion accelerating. politics isconsumer moving higher. defining voter friday. just half an hour before the u.s. travel ban takes effect, there is a new court challenge. hawaii is taking issue with how the government implements the new york -- the new rules.
♪ manus: you are welcome. it is "bloomberg daybreak: europe." news comingaking through from germany at this time. have retail sales, and we have unemployment as well. the ilo unemployment rate coming in at 3.9% for germany. let me double check on that. but retail sales are certainly marching higher, 4.8% on the retail sales. we saw confidence numbers come germany.g in the up about half of 1% in germany. nice, strong a set of numbers there. let's talk about these futures, because we had this selloff in the tech sector.
of the s&p 500 dropped the most in six weeks. maybe the warnings are starting to seep into consciousness, or maybe it is a grand rotation into banking. toity markets not guaranteed carry through, but the rest of europe has indicated it is in consolidating position. 12, 13 is where we are. there is no doubt, volatility is back. rally. the vix volatility overnight in asia has also been on the rise. let's talk about the risk and how that translates into the marketplace, because you are seeing global stocks. global be involved in stocks. if you were not in a stock markets, you were not on the winning side of these markets in 2017. it could have been an awful lot worse given the smacking we saw
yesterday. calling near-term risks for the topix lower. not dependsk, and do on the bank of japan to be there there and square. the dollar is down 0.4%. we have lost nearly 1.5% in june. this is the fading of the trump trade. sick man ofs the global currencies, unless trump can deliver something fiscally for the united states. oil turned it around. opec has no fans to turn deeper cuts. you see u.s. production -- the market is reflecting back. we have the longest winning spree -- streak in two months. production falling -- u.s. production declined the most in almost one year. let's talk about the closing of the equity markets, to give you a slight hint of where we are.
asia playing the catch-up of the united states. europe is putting in the consolidated opening. goldman sachs turned -- cut their targets. it is up above the mid-1600s. the s&p 200, down by 1.5%. this is the debate. look at it down at 15%. you are looking at 10-year markets moving aggressively in germany, and in the united states of america. germany down 13.50. bund, 10 yeareld, as guy johnson was saying earlier, we will finish the year sometime -- somewhere around 0.6%.
there has been a readjustment. long, you were decidedly wrong. let's go to juliette saly with the first word news. u.s. president donald trump and his russian counterpart vladimir putin are meeting for the first time. the meeting during the g 20 summit in hamburg comes as -- as relations between the countries is the lowest in decades. it comes along with possible collusion between the u.s. and russia. the trump administration's revised travel ban faced a new court challenge, even before it took effect. a new set of restrictions on immigrants from six countries began at 8:00 p.m. eastern time. what hawaii asked a judge to quote -- to clarify is it
violates instructions by defining who is covered by the band. the justice department declined to comment. sath korea's new president with president trump at the white house. it comes amid differences between the presidents on how to deal with north korea. after the meeting, trump tweeted, finished a good meeting with the president of south korea. want prime minister approval for her legislative plan, after being forced into concession on abortion rights. theresa may's agenda passed by more than 232 votes. sentiment among u.k. households has fallen to its lowest level
since the brexit referendum. the consumer confidence index struck two -10 since minus nine in may. election prevented britain's from spending on big-ticket items. the world's second-largest economy maintain its momentum in the second quarter. it's spending increased, while nonmanufacturing also gained. it gives policymakers room to focus on financial risk and cooling the property sector. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . another end to the trading day, week, month, quarter, it has been a strong start to the year for asian equities and global equities in general. the regional edge market is up
by about 1.4%. the nikkei closing down the session by 1% and australia aading declines as we see rout in those commodity prices. having a look at stocks in general, following what we saw in the nasdaq, it is down by almost 3%. has risen developer this year. morgan stanley says there is more room to run. bt investment is falling in sydney, one of the worst performances in the region following a ratings downgrade. tomorrow is the twenty-year handover of hong kong to china. is an index of economic policy austerity for china and hong kong as tracks by local media. the green line is the average of what we have seen from 1990 52
today. to can see the -- from 1995 today. you can see it is lower than what it was today. had a huge deluge of data from china and japan. .n japan, we have a crisis it has been a slow rise, and inflation remains far from the bank of japan's 2% target. we cross tonight to tokyo, where james has the latest. there was a surprise jump in the unemployment number. what actually happened? is that a bad sign for the economy? matsui speaking to kathy earlier and she said from the wages side things were getting better. the labor market in japan is a strong. we have seen it for a number of
years, the number of people working is increasing, and that is happening at the same time that corporations are falling. that means the unemployment rate is coming down. what happened this month was, because of so many people optimistic about the economy, they have started looking for work. that pushed up the unemployment rate temporarily. generally, the labor market situation is good. this is a temporary blip and i will expected to go down. no one expects unemployment to start rising anytime soon. manus: when are we going to get this -- in a japan, they have the same issues, or virtually wage aggressive recovery. that is a global phenomenon. wages are up, but not exactly impacting inflation. james: that's right. we saw inflation rise today for the core cpi index.
they are 3.6% -- that was due to the rise of energy prices. there is no pressure on inflation from those paying more, and spending more, and pushing up prices. there is some increase in wages. of that a little bit happening, but it is nowhere near what would be necessary to generate 2% inflation. even the bank of japan said they need to see through percent or 4% increases in wages annually to get 2% inflation. that unions are willing to demand that. if workers are not asking for that and businesses are not willing to give it, there is no indication that will happen. manus: james, thank you very much with the latest from japan. there are hawkish terms from central bankers. that is what has been driving markets to round off the first half of the year. it has been a period embodied by
the reflation trade. for the bullht market. high oil production, that continues to put prices -- pressure on prices, prompting arrangements, and creating a brief bear market. he istalk to yogi dewan, the ceo and partner at hassium asset management. i did a run down of the first quarter. can i get it back to i think more salient issues. i look at volatility. this is vix index up 50%, and we ended up for the day up 14%. the s&p got a battering from the technology stocks. what you make of volatility? this market was ripe for an adjustment. yogi: volatility is here.
it appeared in the last few days. we had the vix hovering around spiked -- it has spiked to 15%. it is not a reflection of what is going on now. often, it is misinterpreted in that regard. we have some volatility. everyone is along the cash -- is long cash. keep it in context. of thehave the end quarter, we are at the half years stage. we have numbers about to come out, we are expecting good revenue growth and earnings numbers, and that drives appreciation, not of or hawkish comments from central banks. manus: so it will be down on earnings. the best start for equities since 1998. these are some of the charts.
, global stocks were up better than in 19 years. commodities, i love what goldman sachs wrote this morning, how did we get it so wrong? when you look at commodities, the bonds market, the equities market, moving forward the next six months, i they don't inthat terms of moving markets. yogi: of course they matter in terms of interest rate sentiment, which impacts the bond in currency markets, which are packing capital flows. we are investors over the long-term, and the fundamental picture has not changed. the market has expected rate hikes in the u.s. for the last two or three years, and they have not delivered, which is why the bond work its have done what
they have done. you have a little bit of volatility based on hawkish comments. commentsen carney's change from one week to another. one week he is hawkish, the next week he is dovish, the next week he is hawkish again. manus: is he trading his credibility chips? yogi: i think he is. i thought, are we talking to the same person? what has changed in the markets for him to change his view? inflation has flipped 2.9%, that has not changed. is stillrtainty there. -- brexit uncertainty is still there. there are a number of constituents in our industry, so it has an impact. nothing has changed fundamentally for him to change his views. manus: in the governor's defense, which is the second part of that sentence, which is that he will like to see more data, and i said that to our
guest earlier, he wants to see more capital expansion and substantial wage rises before he moves cap. to that extent, bloomberg intelligence would disagree that he has not low -- flip-flopped. yogi: the markets do disagree, because you of interest rate sentiments going up to 55% for a rate hike by the end of the year. a rate hike in the u.k. is more likely than it is in the u.s., when you look at interest rate futures in the u.s., they are around 45%. an impact on sterling. sterling does have an impact on earnings. exporte 100 is very much lead in terms of valuation and revenues. you have to pay attention to it, but carney seems to change his mind quite a bit. manus: do you think there is more mileage in sterling? at 144,p levels are up
sterling is at 1.41. manus: we are above that today. yogi: we are above 130. we are at about fair value. i suspect we will stay in this range for the time being. manus: stay with me. yogi dewan, partner of hassium asset management. up next, the eyes have it. theresa may wins support for her program. this is bloomberg. ♪ manus: welcome back.
the business flash. juliette: boeing briefly suspended flights and its new 373 -- 737 for a possible flaw in its engine. that is according to people familiar with the matter. the revelation is another blow to takata -- to our conic -- to arconic. they said in an eu mailed statement, they always strive for quality and continuously improve in partnership with our customers. a boeing representative declined to comment. a french billionaire aims to put paris on a par with silicon valley for innovation. is comments echo those of emmanuel macron. bewe hope that we will -- we are looking
.or young people can -- to come and create the community. juliette: that is your bloomberg business flash. manus: think you'll. -- thank you. let's circle back to the u.k. theresa may want parliamentary approval for her legislative program after being forced into a concession on abortion rights to stave off of the tyndall -- a potential defeat on brexit. he government defeated amendments from labor -- two amendments from labor. as far as markets were concerned, the sterling was up. of england governor
said they plan to raise rates. talking about it. read young, when i through the political nuances, i just wonder, which would you like to be short of in the politics? do. is what labor can we were chatting this -- about this before. when the tories want to get on board with the labor group for an amendment, it can shift down the government at any time. do you want to be short on sterling, guilds, -- gilts, or equities? yogi: political risk is definitely on the rise following brexit. it has already played out in sterling. it would be a brave investor to go short the bond market,
because there is so much quantitative easing in the marketplace. whilst lawns are very expensive, expensive,e very -- manus: you don't want to be short gilts. yogi: you don't want to be short there. there is too much quantitative easing for us to want to take that level of risk. would you be short the u.k. equity market? the market is up 6% year today. with theis up more rest of the world. it is driven by earnings, that we would not be short the ftse 100 again because it is global exposure. it might be more sensible if you theof the belief that markets lead to volatility. the obvious market where you would pay attention is sterling. while it is a fair value and
rallied on the back of hawkish comments from carney, we cannot help think it will trade back down. manus: let's talk about one of the other drivers of dividends tenor of aerlying great number of industries. goldman sachs says how do we get this wrong? they are cutting their oil forecast by $7.50. you are looking at a reassessment. we briefly dipped into negative territory. do you share the concern about the wti market? yogi: not really. i think we agree with goldman's comments that we are in the bottom of a trading range. it is driven by production cuts not being delivered, countries like libya have not played ball. imagery -- in in
inventory. of a lot of itts is what is happening with the dollar, which strengthened considerably and had an adverse affect in commodity prices across the board. the trading range has probably come down, which is what goldman's comment was about, but we think oil prices will start to trade higher. manus: thank you so much. assetewan with hassium management. later on, we will. u.k. shadowhe secretary. we are 30 minutes away from the start of the trading day. a couple of big features of the market is nike. it gained in trade after they saw fourth-quarter estimates. keep an eye on the likes of adidas, how has the contagion
>> good morning, welcome. this is "bloomberg markets: european open." cash is about to open. we will bring you the first trade. i am told that berlin is somewhat underwater, or has been. with matt miller firmly afloat. what are we watching this morning? growl, butere's a will this week really be remembered as a watershed?